Why I Think Job Creation’s a Myth

Job Creation’s a MythThis will be a big week for the 12.5 million Americans officially looking for a full-time job and roughly 23 million Americans that are actually unemployed or underemployed.

Under President Obama, about 4.4 million jobs have been created after the country lost 4.3 million jobs in the first year of Obama’s term in office. That’s a net gain of 100,000 jobs over nearly four years—not exactly earth-shattering—which has resulted in a high unemployment rate.

The U.S. non-farm jobs report comes out this Friday and it had better be good, otherwise the equities market could be heading lower. The consensus estimate is calling for the creation of 120,000 new jobs, an increase from 96,000 in August, but way below the 500,000 monthly jobs that need to be created to drive the unemployment rate lower from the current 8.1%—the 43rd straight month in which the unemployment rate was over 8.0%.

For the time being, there are very few good full-time jobs.


We could see a surge in seasonal hiring as the key holiday shopping season comes into play: Macys, Inc. (NYSE/M) announced it would hire roughly 80,000 seasonal workers for the holiday season; Toys “R” Us, Inc. will hire about 45,000 seasonal workers; Wal-Mart Stores, Inc. (NYSE/WMT) is looking at adding over 50,000 seasonal workers; and Kohls Corporation (NYSE/KSS) reported it would hire over 52,700 people.

But while the job creation may sound great in the headlines, remember that these are only temporary positions and do little for the overall long-term jobs picture, which needs permanent, full-time positions.

Jobs are also not just a problem for America.

The unemployment rate in the troubled and beaten-down eurozone came in at a record 11.4% in August, according to Eurostat. The reading was the highest since the creation of the eurozone in 1999. Consider Spain’s unemployment rate of 24.4%. Compared to the 8.1% in the U.S., the extent of the problem in Spain is apparent. The youth unemployment rate in Spain alone stands around a massive 51.0%, versus 16.4% in the U.S.

The problem is that the tough austerity measures across the eurozone and Europe will result in less spending, which will, in turn, result in fewer jobs being created and a higher unemployment rate—this is a problem.

The same goes for the U.S. with the upcoming “fiscal cliff” that could drive the U.S. economy back into a recession. The problem is that a cut in fiscal spending and higher taxes at this stage, given the fragile economic recovery, are major risks for the country. In my view, this could drive America into another recession. On the other hand, if cuts aren’t made and taxes are not increased, the country’s national debt will continue to spiral out of control and will be passed on to the next generation. (Read “Why We Might Not Want to Fight the Fiscal Cliff.”)